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EU Auditors Concerned By Customs Tax Loopholes

by Ulrika Lomas,, Brussels

08 December 2017

EU customs controls are not being applied effectively, an EU audit has found, with importers able to take advantage of loopholes to reduce or evade their duty liabilities.

The European Court of Auditors investigated whether the European Commission and EU member states had designed robust controls on imports. They visited the customs authorities of Spain, Italy, Poland, Romania, and the UK.

The auditors concluded that importers can deliberately reduce or evade customs duty liability by, for example, undervaluing their goods, declaring a false country of origin, or shifting to a product classification with a lower duty rate. They said that the real origin of goods can be disguised via fraudulent shipment in a country where the goods are stored temporarily and then sent to the EU with fake documents.

The auditors also found that there is insufficient financial incentive for EU member states to apply customs controls and that, among those who do, there is a lack of success in recovering revenue losses. They said that several courier companies are abusing the duty exemption for low-value goods, and that a lack of checks is leading to underpayment of tax on goods purchased online from outside the EU.

The auditors recommended that the European Commission:

  • produce periodic estimates of the customs gap from 2019, and use them to set customs controls targets;
  • strengthen support for national customs services, including a review of collection costs;
  • propose that the next EU action programs contribute financial sustainability to the customs European Information Systems;
  • be more precise in requests contained in Mutual Assistance communications; and
  • propose amendments to customs legislation to make the indication of consignors compulsory.

The auditors recommended that EU member states should:

  • make overrides of controls suggested by a particular risk filter conditional on prior or immediate hierarchical approval;
  • introduce checks in their electronic clearance systems to block import declarations applying for duty relief on goods with declared value above EUR150 or for commercial consignments declared as gifts; and
  • set up investigation plans to tackle abuse of this relief on e-commerce goods trade with non-EU countries.

TAGS: compliance | tax | European Commission | tax compliance | tax avoidance | commerce | audit | Romania | e-commerce | legislation | Italy | Poland | Spain | import duty | trade | European Union (EU) | services | Europe

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